US casinos play Russian roulette in Macau

Pulling in four times as much annual revenue as Las Vegas and Atlantic City combined, Macau is the world’s undisputed gambling hub, but with big profits comes big risks in the form of organized crime and corruption

By Hannah Dreier / AP, LAS VEGAS, Nevada

Illustration: Yusha

Most people still think the US gambling industry is anchored in Las Vegas, Nevada, with its booming Strip and 24/7 action, a place where years of alluring marketing campaigns have helped scrub away the taint of past corruption.

Yet in just a decade, the center of gambling has migrated to the other side of the world, settling in a tiny Chinese territory an hour’s ferry ride from Hong Kong. The gambling mecca of Macau now handles more wagers than all US-based commercial casinos put together and many of those bets end up swelling the balance sheets of US corporations.

Yet as US gambling companies have remade Macau, Macau has also remade them.

These companies have been hit with allegations of improper conduct, prompting investigations and serious questions about how closely US authorities are watching corporations’ overseas dealings.

The quest for Asian riches is changing Las Vegas as well. Casino bosses are tweaking their flagship casinos to look and operate more like Macau-style properties. As they succeed, hints of organized crime are returning to Sin City, this time in the form of Chinese gangs.

However, the moguls are undeterred, increasing their investment at every opportunity.

A few hours’ flight from half the world’s population, Macau is the only place in China where gambling is legal. Each month, 2.5 million tourists flood the glitzy boom territory half the size of Manhattan to try their luck in neon-drenched casinos. Most of them are nouveau-riche Chinese who sip tea and chain-smoke as they play at baccarat, a fast-moving game where gamblers are dealt two cards and predict whether they will beat the banker.

The former Portuguese colony has long been known for its gambling, but used to offer a seedier experience, with small-time gambling dens crowding up against textile factories and gangs, prostitutes and money launderers operating openly in the cobblestone streets.

When China reassumed sovereignty of Macau from Portugal in 1999 and abolished a longstanding gambling monopoly, US companies rushed in to try their luck. Since then, annual revenue in the former backwater has grown tenfold, stacking up to US$38 billion, four times that of Las Vegas and Atlantic City combined.

“It was a swamp,” Las Vegas Sands chief executive Sheldon Adelson said as he looked back on his early venture in an obscure city where Chinese officials envisioned conventions and resorts. “Everybody thought that I was crazy.”

Nevertheless, he and the two US competitors that tried their luck there succeeded spectacularly. Adelson’s first casino-opening there caused a stampede that ripped doors off their hinges. Now operating four booming casinos in Macau, he described Sands as “an Asian company” with a presence in the US. He makes far more in China — with a culture in which notions of luck and fate play integral roles — than in Las Vegas.

“This industry is supply driven, like the movie Field of Dreams: ‘Build it and they will come,’” he said. “I believe that.”

If Adelson’s words and jack-o’-lantern smile suggest all is right in the globalized casino world, consider where he made these statements: on the witness stand in a Vegas courtroom this spring, defending his company against one of his former Macau consultants.

A jury in May ruled against Adelson, awarding the consultant US$70 million for helping Sands secure a lucrative gambling license in Macau. Sands immediately appealed, but the lawsuit may be the least of Adelson’s worries. His firm is also accused of making improper payments to a Macau lawmaker and collaborating with the Chinese mafia. The US Department of Justice and the US Securities and Exchange Commission are investigating. The company says it has done nothing wrong.